Mark Solomon: There's method to our payouts

Sir Mark Solomon says paying salaries at market rates is essential to attract and retain good staff. Photo / Mark Mitchell

The role of charitable organisations that behave commercially is misunderstood, writes Mark Solomon.

The Weekend Herald highlighted concerns over rules governing charitable trusts and in particular those which derive their income from commercial activities.

The general thrust of the article was there is a lack of accountability around such organisations, that in some cases a few individuals are paid too much to the detriment of the beneficiaries and that there was no evidence that enough of the profits are being distributed to those for whom the trusts were established.

The article made reference to Ngai Tahu and the status of our commercial entities as well as to other charitable enterprises who, like Ngai Tahu, do not rely on donations or passive investments to create the funds to be used for charitable purposes. I would like to say at the outset that Ngai Tahu welcomes both the debate and the scrutiny of our activities.

The law which governs charitable trusts is not well understood so I have sympathy for those who wonder at the charitable status of entities that look commercial, or act commercially.

However, in order to have an informed discussion there is a responsibility to present the issues in context and supported by informed analysis.

A great many of the charitable trusts within New Zealand rely on fund-raising, grants and donations to carry out their activities. Others, such as a number of community trusts, take a more passive approach and select fund managers to manage their investment portfolios. They then distribute to other organisations to carry out charitable activities. The Ngai Tahu Charitable Trust is in the grouping of organisations who actively manage their assets via a range of businesses to create the funds to carry out our charitable activities. In my view the focus of the discussion should not be on how the charitable funds were created, but whether or not those funds are ultimately applied for charitable purposes.

In the case of Ngai Tahu this is clearly the case and a quick comparison between the range of activities and projects supported by the Ngai Tahu Trust and that of community trusts shows that we all provide charitable funding for the health and wellbeing of communities, for cultural projects, heritage projects, the environment, and so on.

Whenever Ngai Tahu undertakes activities or provides distributions that are not charitable (according to the charities law) the appropriate taxes are paid either by Ngai Tahu or by the recipient. These include direct distributions to our kaumatua and into our iwi savings scheme Whai Rawa.

The Weekend Herald piece repeats the assertion by Dr Michael Gousmett that the amount "paid out to the runanga compared to the iwi's total wealth seems minimal". While it is legitimate to question the proportion of the distribution of any organisation (charitable or otherwise) it is unhelpful to use operating profit as the baseline measurement.

As a prudent trustee Ngai Tahu has adopted an investment policy framework and a spending rule which is based on best practice for an intergenerational trust.

This means that the annual distribution is not linked to the annual operating profit which can vary dramatically. Instead, it is linked to the total value of the asset and is set at around 4 per cent of that value. On that basis the Ngai Tahu distribution ratio is comparable to that used by other intergenerational investment funds such as the Yale Endowment Fund.

The article also contained an implied criticism that Ngai Tahu employees are overpaid. In my view, this was particularly unfair and misleading. Dr Gousmett is well aware that we are operating large and complex commercial enterprises and paying salaries at market rates is not only fair and decent workplace policy, it is essential if an organisation wants to attract and retain great staff.

I am immensely proud of the fact that as at year end of 2012 we had grown the net worth of our asset base from its 1998 starting point of just over $200 million to $658 million and at the same time we have been able to invest $254 million in tribal development since the time of our settlement. These results are due in large part to the hard work of those employees.

If we had operated a more passive investment model the salaries and other costs of creating wealth would simply be hidden behind fund management fees and our overall returns would almost certainly be much lower.

I cannot speak on behalf of any other organisation but I can reassure Dr Gousmett that our people are not shy about reminding me of my responsibilities and accountabilities as the kaiwhakahaere (chairman) of Te Runanga o Ngai Tahu.

It may be one of my aunties who interrogates me, or a nephew, or a cousin of a cousin. It may be someone I have never met before, but with whom I share common ancestry and who is as deserving of an answer or explanation as anyone of our 50,000-strong iwi. I am accountable to them all by formal and informal means.

I consider it a privilege. As extended family members we are all accountable to each other but I more so because of the position I hold.

And the accountability that is demanded by iwi members is also demanded by law. Under the Charities Act, the income the iwi earns (from the assets we hold in a charitable trust) must be used for charitable purposes and not for private pecuniary profit. We welcome anyone who still has their doubts to come and sit with us and learn about our organisation first hand.

"Mo tatou, a, mo ka uri, a muri ake nei" - "For us and our children after us."

Sir Mark Solomon is chairman of Te Runanga o Ngai Tahu.